The Apple tax ruling and the EU


Sir, – Within a matter of a few hours after the verdict being announced in the Apple/Ireland v European Commission tax case, up pops the European Commission with a proposal to use Article 116 of the Lisbon Treaty to push through changes to tax rules without requiring unanimity (“Apple case hardens Brussels’ resolve to tackle ‘aggressive taxation’”, News, July 16th). So say goodbye to circa €13 billion in tax revenue, and not just the continuation of 12.5 per cent corporate tax rates but the competence to continue to set your own corporate tax rates in the (very near) future. Who saw that coming during the second referendum campaign in 2009? In the circumstances I’m not at all sure that “congratulations’”is really the appropriate sentiment after such a magnificently pyrrhic victory. – Yours, etc,



Sir, – It is to be welcomed that the court appears not to have conflated tax law with antitrust/competition law. Ireland and Apple had appealed the 2016 European Commission’s ruling, arguing that the tax arrangements were consistent with European law. To breach European state aid competition law requires the following four cumulative conditions to be met: (i) the measure must be imputable to the State and financed through State resources; (ii) it must confer an advantage on its recipient; (iii) that advantage must be selective; and (iv) the measure must distort competition and have the potential to affect trade between member states. The court ruling holds, among other things, that Ireland did not give Apple illegal state aid. It should be remembered that the decision to appeal met with strong and sometimes colourful criticism. For example, some, alleging that in engaging in the tax arrangement with Apple, “the State colluded with the greatest work of fiction since Ulysses”. The Government was told it instruct its lawyers to “withdraw the appeal and apologise to our neighbours”. Yet, the State had no option but to appeal the ruling. Otherwise, it ran the risk of allowing the European Commission introduce a common consolidated corporate tax-base hybrid system, retrospectively. In addition, the State would have acquiesced with the European Commission in selectively upending the international tax system, through the prism of state aid competition law. Congratulations, Ireland. No apologies needed! – Yours, etc,


Lecturer in Taxation,

Limerick Institute

of Technology.

Sir, – Congratulations to Cliff Taylor on his analysis, which is both intelligent and intelligible, of the European court decision in the Apple case (“EU court decision settles ¤13 billion question: Apple’s money was never ours to tax”, July 15th).

A fascinating part of the European Commission’s 2016 determination that two Apple subsidiaries should pay €13 billion in taxes to Ireland was the suggestion that they need not do so if other countries put up their hands for a share of the Apple windfall. Ireland, it seemed to suggest, should be the tax collector of last resort. I wouldn’t like to have to draft the piece of tax law which would have the effect that Ireland should hang around to see if other countries feel like taxing a corporation before deciding whether Irish tax should be collected.

Many commentators on the 2016 determination were exercised by non-resident companies that happen to be incorporated in Ireland. As they correctly noted, companies which are incorporated in Ireland but which are managed and controlled in the United States might not, under the tax law prevailing before 2014, be tax-resident in either country. The US adopts a place-of-incorporation test for corporate tax residence while Ireland generally follows a management-and-control test and has done for decades. What was not evident from much of the press coverage or political commentary is that it was the US, and not Ireland, which was the outlier in this regard. Almost all countries, in their bilateral double tax treaties, follow the OECD model tax convention in using the place of effective management of a company to resolve cases of a company which is tax-resident under domestic law in both countries. Ireland, in its double tax treaties, follows the OECD model in this matter. The US does not.

In my days as a corporate tax consultant, I advised many companies which were incorporated outside Ireland but which were managed and controlled here. These companies were fully within the Irish tax net because the fact of their Irish management and control made them tax-resident in Ireland. I have not seen extensive press coverage of the fact that companies incorporated outside Ireland pay Irish corporation tax. These foreign-incorporated but Irish-resident companies follow the Irish tax rules in paying tax here just as Irish-incorporated companies which are not tax-resident here did in not paying Irish corporation tax.

The place of incorporation of a company is somewhat analogous to the place of birth of an individual. I have three brothers-in-law. One was born in Ireland and has lived here all his life. He pays Irish taxes. Another was born in Africa and has lived in the UK for the last 25 years. Naturally he does not pay Irish taxes. The third is the interesting one – he was born in Ireland but has lived in Australia for 30 years. He does not pay Irish taxes because, notwithstanding his Irish birth, he is not tax-resident here. He would be bemused if he saw headlines to the effect that he has both an Irish passport and a 0 per cent effective Irish tax rate.

It is a nonsense to suggest that an Irish-incorporated company which is not tax-resident in Ireland has a 1 per cent or any other Irish tax rate by relating the tax paid by it on its Irish-source income to the company’s total income. The gap was in US tax law which allowed a non-US-incorporated company to avoid paying taxes there notwithstanding that all the shots were called in Cupertino and not in Cork. – Yours, etc,


Rathmines, Dublin 6.